Congress is debating the federal government debt limit again, which it has done regularly since it created the legislation. Congress first limited debt in 1917 to $15 billion to blunt opposition to World War I, then raised in the next year to $20 billion to finance U.S. involvement in that war. It raised the limit again to accommodate FDR’s massive spending during the Great Depression and for World War II. Since 1962, Congress has hiked the limit 78 times.
Democrats hate the debt limit when they hold power because it can theoretically dampen their lust to spend taxpayer money as fast as they would like. Republicans tend to quickly elevate the limit when in power, which Democrats rarely oppose, but use it to embarrass Democrats when not.
Rather than do the honest thing this time and repeal the debt limit legislation, Democrats want to perpetrate a greater hoax, one worse than Ponzi’s scheme or Bernie Madoff’s fraud. They want the US Treasury to use its Constitutional powers to mint money to make a one-ounce platinum coin and stamp it with the value of $1 Trillion. The Treasury would deposit the coin with the Fed and draw on it to pay for spending. The point of the hoax is to avoid having the federal government borrow more money and instigate another fight in Congress over debt limits. Nobel Prize winning economist Paul Krugman has endorsed the fake coin scheme.
The platinum coin idea popped up in 2013, but the idea has been around at least 2,500 years. In 594 B.C., little more than a century after the invention of coins, Greece conducted one of the first coin hoaxes known in history. Solon, a politician in Athens, figured out that he could reduce the content of the precious metal in each coin by adding base metals to the silver then stamping the coins with the same weight as if they contained the original amount of silver. In other words, he committed fraud by stamping a false weight on the coins.
Solon reduced the silver content of Athenian coins by 25%. Then he forced merchants to accept the coin at face value instead of the real weight of the silver in the coins. The state had expanded the money supply and was able to pay off its debts without having gathered any more gold or silver through taxes. Many philosophers at the time considered Solon a genius, but he was nothing more than a gangster and fraud.
Producers and retailers caught on very quickly to the fraud and raised their prices enough to ensure they received the same weight of silver for their goods as they had before the debasement. Since the coins had been debased by adding 25% base metals, merchants raised prices by at least 25%. Price inflation tended to anger citizens and spark riots, but the rioters rarely connected higher prices with the monarch’s fraud and, instead, blamed businessmen for their greed.
That the coin hoax fools so many intelligent people reveals how ignorant Americans have become about money. Through the last quarter of the 19th century, Americans continually fought over money. The U.S. had chosen to mint only gold money in 1873 after having produced silver and gold coins for almost a century. Gold as the only money causes the money supply to grow slowly, around the rate of population increases, and keeps prices from rising rapidly. Some politicians claimed it favored banks at the expense of farmers and working men because they couldn’t rely on the price inflation of the Civil War to wash away their debts. They wanted treasury to resume minting silver coins because the supply of silver grew more rapidly than gold and the rapid increases in the money supply would cause prices to rise. In other words, the “silverites” didn’t want to pay their debts.
The trillion-dollar coin hoax is not different from Solon’s fraud or that of the silverites. Democrats could commit the same crime with gold, silver or copper coins. Platinum merely makes the hoax more mysterious and more credible for the gullible. And it is a crime. One ounce of platinum is worth around $1,000 and people can buy one ounce platinum coins for $1,200. Stamping such platinum coins with a value of $1 trillion is pure fraud and violates the Bible’s prohibition of false measures:
“You shall do no wrong in judgment, in measures of length or weight or quantity.”Leviticus 19:35
“A false balance is an abomination to the Lord, but a just weight is his delight."Proverbs 11:1
“You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small."Deuteronomy 25:13-14
People who get the new money first are privileged to buy stock and bond assets or real estate before prices rise and thus become richer. New money trickles down to the working poor last, after prices have risen, leaving the final recipients of the money worse off. In other words, it increases inequality and steals from the poor, one of the worst crimes in the Bible.
Roger D. McKinney lives in Broken Arrow, OK with his wife, Jeanie. He has three children and six grandchildren. He earned an M.A. in economics from the University of Oklahoma and B.A.s from the University of Tulsa and Baptist Bible College. He has written two books, Financial Bull Riding and God is a Capitalist: Markets from Moses to Marx, and articles for the Affluent Christian Investor, the Foundation for Economic Education, The Mises Institute, the American Institute for Economic Research and Townhall Finance. Previous articles can be found at facebook.com/thechristiancapitalist. He is a conservative Baptist and promoter of the Austrian school of economics.